Okay, good morning, everyone, and thank you again for being here at the 47th Annual Raymond James Institutional Investors Conference. You know, one of the things that has made this conference so great through the years is the opportunity to rotate in new companies, new ideas, along with some companies that have had our long-standing coverage. It's in that angle that I'm honored to introduce American Integrity Insurance Group to the conference today. They're a recently minted IPO company and a very successful long-standing track record in the Florida market.
What I'm gonna suggest is for to begin with, that the company begin give us some background on the history of the company, its position in the Florida market, how things evolved leading up to the IPO, and then a little bit about the IPO performance. From management today, we have Ben Lurie, who is Chief Financial Officer, and Jon Ritchie, who serves as the President of the company. I think you're gonna start, right, Ben?
Yes, sir.
All right. Go for it.
Hello, everybody, and thank you for taking the time to come and hear us today. I'm Ben Lurie. I'm the CFO of American Integrity. Prior to being the CFO of American Integrity, I was the CFO of a private equity company based in Dallas called Sewell, and we were the sole investor in American Integrity in 2007. American Integrity has a 2-decade history and track record. At that time, we invested $10 million in the company, and over the last 20 years, that's grown into a company worth $400 million today, with $75 million of distributions, plus a $20 million special dividend we just made this month, and that's with no additional capital contributions along the way. Initial investors earned greater than a 20% CAGR over a 2-decade period.
Now what we've built during that time, and I've since become the CFO of American Integrity, is a company with a real platform. This is a company that has long-standing agent relationships and a sales network which is unique amongst its peers and has the ability to do voluntary business within the Florida market, unlike most of the other folks that are currently publicly traded. Now I'll hand it over to Jon to talk about, what the history of the company was and then where we are today.
Yeah. Florida's a fragmented market for property insurance, particularly homeowners insurance. As Ben said, we're 20 years in here, which makes us an elder statesman within this state, which is ironic given financial services, particularly insurance. The volatility of the Florida marketplace has been tremendous. We went through a period of time from 2016 roughly until 2022 where the litigation engine of the plaintiff bar dismantled the property insurance marketplace, took 11 companies under, forced rates to very sizable amounts for the consumer, saw Citizens grow to 1.5 million policies, and really brought the marketplace to the edge in terms of solvency.
Thankfully, in December of 2022, Governor DeSantis and the legislature passed some monumental tort reform which removed the motivation for the plaintiff bar to continue their actions, most notably the one-way attorney fee statute, reducing statute of limitations for claims reporting, which reduced the tail for late-reported claims. We really have seen a dramatic turnaround in the marketplace since then, which, 1, has enabled us to grow within the state in places and for certain risk characteristics we would not have touched prior to the reform, and then, 2, enabled us to IPO last year, which we're very grateful and humbled that we were able to get into the public markets. For American Integrity, and Ben touched on this, we don't source our business predominantly or solely through Citizens takeout business.
That's how we were founded in 2006, 2007. It's a great avenue for production. However, for us, we wanted to build a sustainable long-term organic company, and that's through the voluntary marketplace. We're sourcing our business through three channels on the voluntary side. One, through independent agents. In the state of Florida, the independent agent is alive and well and serves an important role in the ecosystem for the consumer and their insurance buying decisions. Second are new construction home builders. New construction has been very active in the state. We estimate that we write 3 out of every 10 new home builds here in the state of Florida. Lastly, national carriers. With the exception of State Farm, there really are not national carriers writing homeowners risk in Florida.
They want the auto, but they need to find a home, so to speak, for the homeowners risk, and we partner with all national carriers with the exception of State Farm. We're based in Tampa, about 310 employees at year-end. As Ben said, we are a true, brick-and-mortar insurance company in terms of how we operate the business. We have selectively expanded outside of our state into South Carolina, North Carolina, and Georgia with our new home builder agents, but 97% of our premium still comes from within the state of Florida. As we look at what we did in 2025 and outward into 2026, the growth initiatives for us within our own state is in Tri-County.
We did not write business in Tri-County deliberately for the greater part of a decade because of the litigation problems I've already touched on. Because of the reform, we're able to open up capacity in that part of the state, which represents 28% of the population. Truly it is entering a new state within our own state of Florida. Secondly, what we call middle-aged homes because of the litigation issues that we were facing, we were writing predominantly 0 to 5 age of home, and we're expanding back to what we used to write before the litigation issues that plagued Florida.
We see tremendous growth opportunity, within our state, and we also believe that American Integrity positioned with our distribution and our technology platform and our 20-year track record, we really are in a great position to capitalize on this and grow the company in 2026 and into 2027.
That's why we IPO'd, as Greg said, in May. We IPO'd at $16, and we're already up 25% since then. We think we've got a long way to go, and we're really excited about the future.
Great. You know, I think it's probably worth some time revisiting the comments around the litigation reform. You know, Allstate was here earlier this morning, and they spoke positively about what Florida has done from a legislative reform standpoint, not only affecting pro-property, but auto, and I know that's not your area of focus. Other large companies have prominently featured the Florida tort reform legislation as a beacon of success, you know, that should be held out across the country. Maybe spend a minute and talk to us about that because, you know, the legacy experience in Florida were these billboard attorneys that used to just go around and pillage the community for ambulance-chasing fees, et cetera. Give us some perspective on what's happened and how it's sticking.
Yeah.
That's the most, the critical piece is it's sticking.
The underpinning of the litigation issues in Florida was a 100-year statute within the state, the one-way attorney fee statute, where $1 awarded beyond what was offered, 100% of attorney fees were levied on the insurance company. That had always been an undercurrent within the state in terms of litigation issues. What really threw gasoline on the fire was a state Supreme Court ruling, Sebo, in 2016, which put up for debate proximate cause versus concurrent causation. In practice, what happened here is a 20-year-old roof that needed to be repaired that normally would have been denied a claim because of wear and tear and the exclusionary language. If 1 or 2 shingles were lifted because of a windstorm or a named storm or anything else, coverage was opened.
The contractors, backed by the plaintiff attorneys, realized this opportunity, and they began canvassing neighborhoods, soliciting claims, and it created an absolute firestorm of claim activity and late reported claims, which exacerbated the problem on top of the one-way attorney fee statute. In terms of the legislative reform, abolishing the one-way attorney fee statute, a 1-year statute of limitations, abolishing Assignment of Benefits within the state truly has been monumental for the state of Florida. We saw it early in our attritional loss ratio and the benefit that we were beginning to see, particularly in accident year 2023 and into 2024.
Hurricane Milton, from a named storm perspective, was the first true test where comparatively speaking to Hurricane Ian or Hurricane Irma prior to that, the litigation frequency was about 2%-3% for Hurricane Milton compared to a 13%-15% litigation frequency previously. Lastly, I'll add in terms of the politics of this and the defensibility of this reform, we are confident that this reform will not be peeled back or adjusted negatively for the industry because of current leadership, but certainly incoming leadership as well. The next speaker or the next Senate President is Jim Boyd, who's an insurance agent. He's been a strong proponent of tort reform for the insurance industry, and he will not do anything to unwind this.
Incoming House leadership is equally as strong, and then it appears currently, based upon polling, that Byron Donalds will be our next governor within the state of Florida. We've engaged with him already, and he understands that doing nothing is the best outcome for Floridians because they are starting to see the benefit of this reform in terms of reduced primary rate premium that they're paying on an annual basis.
That last point is so critical because as residents of the state, we understand the political pressures of high premium costs for homeowners insurance. To see Citizens and other entities announce publicly rate reductions, I think is a welcome sign that the citizens will be happy with the outcome. That's great. It also happens to be a great segue because you're producing great results. The industry has recovered, right? You had a, you know, a period of time where prices were going up substantially. Now we're in an era where I'm expecting a rate cut on my policy this year on top of the rate cut I got last year. I'm sure, you know, the broader population inside Florida is expecting that.
Talk to us about the pricing cycle for your business and talk to us about how you think that might evolve as it relates to your financials over the next 18 to 24 months.
Great question. One of the impacts we've seen of prices coming down is that our retention rates have gone way up. So you're shopping for new insurance when your rate goes up at your renewal. Now that renewals have become flat, our retention ratio has moved up from the low to mid-70s to the low to mid-80s, which helps our financials as well. You know, you've got two issues at play here. You've got the premium rates that we're charging to consumers, and then you've got your reinsurance rates, which are a secondary factor from everything we've talked about. What we've seen is on the reinsurance, which is a major cost component of our structure, those numbers are coming down very quickly. We're seeing 10% or more reductions on a risk-adjusted basis for our cat reinsurance program.
There's a lot of competition in the cat and ILS markets.
Mm.
Those markets are responding to the new environment that we've got here in Florida. Likewise, it's good for customers, and we want premiums to come down. They've come down, you know, on average about 5%, but then they're offset by an inflation factor, which is inherent in all of our pricing structure and in the pricing structures in Florida. While you have a 5% decrease, that's mitigated by a 3% inflation factor that has a role in offsetting that. Because the reinsurance is such a meaningful part of our expense structure, these reduced reinsurance prices are gonna have significant impacts on our profitability over the next year or two.
If I'm not mistaken, the reinsurance costs also go into your filed rate making process. That will be a straight flow through to your premium structure, right?
Yeah, there is some latency within 12 months after-
Yeah
... placing your cover. You have to file a limited reinsurance filing. Ultimately, you're absolutely right. That will be a factor into the rate making for the consumer.
Ben, in your answer, you mentioned the fact that the inflation is an offset. I feel like the insured value initiatives that have been going on countrywide really, but also in the state of Florida, I feel like we're getting to that inflection point where the rate of change is gonna decelerate, or the rate of increases is gonna start to decelerate 'cause we sort of caught up. Is that an accurate perception of where the market is in terms of replacement cost factors?
It is. We review on a quarterly basis from ISO Verisk, replacement cost data, certainly the velocity that we were seeing in prior years is moderating. I think, Greg, your comment's accurate that we are getting to the more of a plateau steady-state mode for Florida, certainly it's still not zero, it's not the exorbitant amount that we saw previously.
I'm gonna pivot for a second. You gave me an opportunity to ask about Verisk. We happened to upgrade the stock this morning. I would like to know your experience with Verisk because you talked about them, you're using their datasets. The stock has been crushed because of concerns of AI. What's your perspective of Verisk?
They're an important vendor for us. We use them at point of sale from an underwriting perspective with their 360Value location services. I'm sure I'm forgetting a couple other ones that we use from Verisk. Certainly they're an important vendor for us, and they've added tremendous value in how we underwrite on the front end and even some claim work on the back end. Certainly they amongst others, but Verisk is near the top for us in terms of a vendor that we utilize.
Excellent. Back to the regularly scheduled program. I couldn't help myself there. Reinsurance costs are coming down. That's gonna translate into lower costs for consumers. The profitability has been great. Obviously the next leg of the journey would be growth. You mentioned some of that in your, in your other comments, so let's revisit growth. It's more competitive. Florida, you talked about these other states. Talk about your outlook for growth, you know, not just this year, but, you know, as you think about a three to five-year basis.
Let's start with Tri-County. As I mentioned, it's 28% of Florida's population. It's a region that historically for American Integrity, we did not write business in because of the issues that the state faced. With that being said, we have distribution in place already with particularly our national accounts and our new home builder agents that we're seeing already in 2026 very good signs of success and growth opportunity in that part of the state, which organically that's great growth on a standalone basis, it also helps the portfolio in balancing it out. For American Integrity specifically, it takes some pressure off some peak zones for us from a PML perspective and reinsurance purchasing standpoint. We're very pleased with that. The second big growth initiative for us is what we call middle-aged homes.
For us, that's by definition a three-tab shingle roof that's anywhere from, call it 6-15 years of age that we could not underwrite during the litigation crisis because of the issues that were already mentioned. Historically, prior to those issues, that was our bread and butter and what we predominantly wrote. We deviated to new construction out of necessity, and it's good quality business, but now we're still getting that new construction business, and we're returning back to what we used to write historically with middle-aged homes with distribution that has, in some cases, a 20-year track record of trading with us and writing on our paper. Those two growth initiatives within the state of Florida is where we're focusing for this year and into next year.
Outside of the state, the only reason that we entered some other southeastern regional states is because of our new home builder agents. They needed additional capacity. We were able to afford that. Business is performing very well on a standalone basis, but we're getting more buying power as well back within the state of Florida. With that being said, 97% or so of our premium in force is within the state of Florida. You know, if you flash forward over a five-year time period, you're not gonna wake up with an American Integrity that has only 50% of our premium within the state. We are a Florida company, but we're able to also opportunistically write in other states when it makes sense and where it makes sense.
You know, there's a scorecard for this new business. The Florida OIR puts out rankings of new business sales, voluntary sales within the market, and we rank consistently as a leader in all three areas of new policies, of total policies, of total premiums. We rank amongst the top leaders within our peer group, very consistently. We did again this quarter. That shows you how we're growing our organic business throughout the state. That's a long-tailed opportunity. That's gonna go, as you said, three or five years and even longer than that.
The new home builder initiative for you has been remarkable, and it happens to correlate with another company that was just here a little bit ago, Baldwin. They have spoken about how their new home product is a lot lower than the average for the marketplace, and I'm sure that shows up in your numbers, which is another positive attribute to your company, correct?
Absolutely. Baldwin is a great trading partner of ours, particularly, Westwood, which they acquired a couple of years ago, has been a great new home builder agent for us. To your point, yes, the attritional experience we see from new construction is tremendously. You know, our gross loss ratio for the year was about 17%, the new home builder segment certainly is lower than that. The new home builder segment obviously is contributing favorably to that 17% gross loss ratio.
Excellent. We have about 10 minutes left, it's probably appropriate to talk some financials, right? You know, bringing your comments about reinsurance and financials together, I know there's some changes in your reinsurance structure for 2026 that's gonna come through your financials. Spend a minute talking about that, and then maybe you can step back and provide us some better perspective, broader perspective on what you think about how the performance for the company should, you know, what your, what your expectations are for 2026.
That sounds great. Thank you. In addition to our cat reinsurance program, so on one hand, we have catastrophe reinsurance. We think one of the broadest and deepest coverages in the market. We measured against the worst years historically in Florida and make sure that those would be contained within our reinsurance towers, and those will remain robust as ever. In addition, though, we have quota share reinsurance, which is really more of a financing mechanism whereby we sell our non-cat premiums out to quota share partners. It's really more of a financing mechanism. In the past, we've done a 40% quota share, but we really like the premiums on our book, and we wanna keep more of it, as it's very profitable in the current environment.
As of 12/31/2025, we walked our quota share down from 40% to 25%. That was one of the uses of capital and one of the reasons we went public, and we may continue to walk that down over time. What that does is immediately drives higher net net earnings and net revenues, and the extra profitability will all hit the bottom line over time. As far as your question of what do we expect financially over the next couple of years, we had a tremendous year last year. We earned $100 million. We're excited about this year. We, we know everybody's expectations are strong for strong earnings next year, and everything we see points to outperformance in most of the areas that we're looking at. We're excited about our last quarter.
We outperformed expectations. We intend to continue to do so. We think this is the best period in our history to be in our market. It's been a long history. We've seen all parts of the market cycle. I don't think we've ever been more excited than we are today.
Yes, and I think most of the analysts that are following your company probably assume that lightning's not gonna strike twice or, in other words, we're gonna have a hurricane in 2026, but maybe not.
Well, we underwrite an expectation actuarially for a storm.
I think it's this is a good point to make before we close out on a capital thing, which is just how you protect the balance sheet with reinsurance because, you know, it's not just one event, it's multiple events that you structure your reinsurance program to provide some balance sheet protection. Spend a second just summarizing how you think about multiple events and how it might come through your financials.
For us, vertical and horizontal cover is critically important. We purchase to a 130-year return period on a first event basis. A longer conversation is what is that return period from the modeled results because the modeling agencies still have a social inflation load in their PMLs during the litigation issues that plagued Florida. You can make a strong argument that that 130-year return period, and we agree with this, is actually in excess probably to a 150-year, 160-year return period. In terms of horizontal cover, we want to ensure, and we use the 2004 storm season as our anchor, that both on a frequency and severity basis, we can withstand that type of an event season and those type of events individually.
We buy third and fourth event cover to ensure that a multiple event season like that is retained and contained within our reinsurance program. Obviously, retention is incredibly important to us so that we're not risking much of the balance sheet on an annual basis and that a multiple event season would be more of an earnings hit for us than a capital event. That's how we've managed and how we've bought reinsurance for the last 20 years. There really isn't anything different that we've done post-IPO now as a public company from a risk transfer perspective. It's just ensuring that we live to fight another day if we have an abnormally high hurricane season, either on a frequency or severity basis.
For those not old enough to remember, 2004 was when we had four hurricanes crisscross the state of Florida, which was a remarkable occurrence in and of itself. We're, you know, approaching the end of the time. I think one of the interesting announcements that came out as a result of a great year for you was the dividend announcement. Why don't we close out with just your perspective around capital management and the decision-making process leading up to the dividend?
That's great. We are well-capitalized to take on all of these growth opportunities that Jon was talking about. The Tri-County growth opportunity, writing middle-aged homes, walking down our quota share to retain more of the premium. We're excited about all of those opportunities. In 2025, it was a storm-free season. There was no catastrophe storms. We had excess earnings or windfall earnings. Over our 20-year history, we've got a proven record of wanting to return capital to our investors when we have the opportunity. We announced a special dividend of $20 million on our last earnings call payable in the next few weeks, and that's a way of returning capital when we have more than we need.
That said, the rest of the capital on our balance sheet is well positioned to drive fantastic growth over the next coming years.
Excellent. Okay. Unless there's other questions, and I don't think there are, we're gonna pivot. We're gonna close out. Management's gonna be downstairs in Cordova 6 for a breakout session. Just wanna thank you guys for coming and participating in our conference this year. Thank you.
Thanks.
Thank you, Greg.